The Counteroffer Conundrum: Why Buying Time Isn’t a Long-Term Talent Strategy

In today’s competitive talent market, we’re seeing a growing trend that’s raising eyebrows across industries: companies are increasingly counteroffering employees who resign, often with significant salary increases and improved employment terms. On the surface, this seems like a smart move—retain institutional knowledge, avoid recruitment costs, and maintain continuity. But as recruitment professionals, we’ve seen the other side of the coin, and it’s not as shiny as it appears.

 

The Rise of the Counteroffer

The logic behind counteroffers is simple. Hiring is expensive. According to various industry reports, the cost of replacing an employee can range from 50% to 200% of their annual salary, depending on the role. Add to that the time it takes to recruit, onboard, and train a new hire, and it’s no wonder companies are tempted to throw money at the problem to make it go away.

But here’s the catch: counteroffers are often a reactive, short-term fix to a deeper issue. And more often than not, they fail to address the root cause of the resignation.

 

Why Employees Resign in the First Place

When an employee decides to leave, it’s rarely just about the money. Sure, compensation plays a role, but it’s usually part of a broader mix of factors—lack of career progression, poor management, misalignment with company values, burnout, or simply a desire for new challenges.

A counteroffer might temporarily patch the financial gap, but it doesn’t resolve the underlying dissatisfaction. In fact, it can sometimes exacerbate it. The employee may feel their value was only recognized when they threatened to leave, which can breed resentment and erode trust.

 

The Data Doesn’t Lie

Studies consistently show that employees who accept counteroffers often end up leaving within 6 to 12 months anyway. Why? Because the reasons they wanted to leave in the first place haven’t changed. The shiny new salary might keep them around for a while, but the honeymoon period is short-lived.

From our experience in recruitment, we’ve seen this play out time and again. A candidate accepts a counteroffer, only to reach out months later, still unhappy and now with a more complicated story to tell future employers.

 

The Ripple Effect on Team Morale

There’s another layer to this issue that’s often overlooked: the impact on the wider team. When one employee receives a significant pay bump to stay, others inevitably find out. This can lead to feelings of inequity and frustration among colleagues who may feel undervalued or overlooked.

Suddenly, you’re not just dealing with one retention issue—you’re managing a morale problem that can spread quickly. It can also set a precedent that employees need to threaten resignation to get a raise, which is a dangerous culture to cultivate.

 

Inflationary Pressure on Salaries

Counteroffers can also distort internal salary structures. If one team member receives a 20% increase to stay, others on similar pay bands may expect the same. This can lead to wage inflation that’s unsustainable in the long run and creates internal pay disparities that are difficult to justify.

Moreover, it sends a message that loyalty isn’t rewarded—only the threat of leaving is. That’s not the kind of message that builds a strong, committed workforce.

 

A Better Approach: Proactive Retention

Instead of relying on counteroffers as a retention strategy, companies should focus on proactive engagement. This means:

 

• Regular check-ins to understand employee satisfaction and career goals.
• Transparent career development pathways that show employees how they can grow within the organization.
• Competitive compensation reviews that ensure pay is fair and market-aligned—before someone hands in their notice.
• Strong leadership and communication, which are often the biggest drivers of employee engagement.

 

When employees feel heard, valued, and supported, they’re far less likely to look elsewhere. And if they do leave, it’s more likely to be for a genuine career move rather than a cry for recognition.

 

Final Thoughts

Counteroffers might seem like a quick win, but they’re rarely a long-term solution. They can mask deeper issues, disrupt team dynamics, and ultimately delay the inevitable. As recruitment professionals, we encourage companies to dig deeper when an employee resigns. Ask the hard questions. Understand the real reasons behind their decision. And most importantly, use that insight to improve the employee experience for everyone—not just the one who’s walking out the door.

Retention isn’t about reacting to resignations. It’s about creating an environment where people don’t want to leave in the first place.